02 June 2014

Fed Circuit Wrong Again On Patent Law

The U.S. Supreme Court continued a decade long vigorous trend of swiftly, and usually unanimously, reversing the United States Court of Appeals for the Federal Circuit for adopting doctrines that too strongly favor patent holders in Limelight Networks v. Akamai Technologies and Nautilus v. Biosig Instruments (these are the second and third such unanimous reversals of the Federal Circuit on patent law this term).

In Limelight Networks, the Court held that liability for inducing infringement could not exist when there was no direct infringement (the conduct in question involved part of a patented process being carried out by one party, who allegedly urged customers to carry out the balance of the patented process themselves, so that no one person infringed). In Nautilus, the Court rebuked a standard for what kind of patent description was excessively vague that was absurdly indulgent to the patent applicant.

A couple more patent cases appealed from the Federal Circuit, including Alice Corp. v. CLS Bank International, which concerns the question of whether computer implementation of a business method can be patented because they are computerized implementations of ideas, and Teva v. Sandoz, concerning whether trial court findings of fact in connection with patent claim construction should be reviewed on appeal de novo, unlike other findings of fact by trial courts.

The Federal Circuit found in favor of CLS Bank in the Alice Corp. case by finding that the software patent at issue was invalid, but split 5-5 in an en banc ruling on the proper legal standard to apply to its case; the U.S Supreme Court heard oral arguments on March 31, 2014 that suggested their holding would likely be a narrow one, rather than one that upset the lion's share of software patents. Cert was only granted in the Teva case in March, so it has not yet been fully briefed or argued.

A Continuing Trend

The two reversals today follow a long string of reversals of the Federal Circuit (about seventeen prior to the two rulings today) over the last decade, all but three of which weakened patent holder's rights. For example, the list below includes some of the following more notable U.S. Supreme Court patent law rulings, in approximately reverse chronological order):

The list above omits four cases that are arguably patent cases in the U.S. Supreme Court in the last decade because they don't implicate the patent holder v. infringer dimension at issues in the other cases listed above:
* Stanford v. Roche (2011) (a case over who is entitled to a patent between two potential patent holders)
* LabCorp v. Metabolite (2006) (dismissed as improvidently granted)
* Ill. Tool Works v. Indep. Ink (2006) (primarily an anti-trust case)* Gunn v. Minton (2013) (unanimous) (overruling Federal Circuit precedents which had held that federal courts have broad jurisdiction over claims of malpractice in attorney malpractice cases where the underlying malpractice involved patent law, while reviewing a Texas Supreme Court ruling).

Why Is This Trend Notable?

Thus, for the last decade, patent holders have scored 3-16 in the U.S. Supreme Court's review of Federal Circuit cases, in each case, unanimously or nearly so. Either way, the Federal Circuit has received little respect from the U.S. Supreme Court.

Also notably, the most controversial ruling of the U.S. Supreme Court on patent law in past decade was the Bowman v. Monsanto case, one of just two in which it ruled in favor of the patent holder. Moreover, critics of some of the anti-patent holder cases, such as Bilski v. Kappos argue that the U.S. Supreme Court ruling wasn't broad enough, not that the reversal of the Federal Circuit was inappropriate.

The mere fact that the Federal Circuit has been repeatedly reversed isn't too surprising, in and of itself. Since the Federal Circuit has exclusive jurisdiction over these cases, there are never circuit splits where the Court can affirm the courts on the correct side of the split. Unless at least four justices think that the Federal Court is mistaken and that five justices will agree, there is no reason to grant certiorari. So, when the U.S. Supreme Court takes up a Federal Circuit cases, it will usually reverse the appellate court's decision.

But, for many years, the U.S. Supreme Court largely deferred to the Federal Circuit and refrained from taking any patent cases at all, a trend that has now ended with a high rate of review for the Federal Circuit's fairly small patent docket.

What makes the cases even more notable is that the reversals are overwhelmingly of decisions that favor patent holders and make patent protection stronger. The U.S. Supreme Court's rulings, in contrast, have tended to weaken intellectual property protections. Furthermore, the reversals are frequently unanimous or nearly so. This suggests that the Federal Circuit is deeply out of step with how the U.S. Supreme Court sees the proper interpretation of patent laws on a broad, philosophical basis.

It also suggests that patent law is a legal subject which is not partisan along the usual political lines in the current U.S. Supreme Court. This lack of partisan disagreement also suggests that this is an area where there may be room for bipartisan legislative progress at some point.

Is The Federal Circuit Broken?

This string of reversals has spawned serious discussion over whether the exclusive jurisdiction of the United States Court of Appeals for the Federal Circuit over intellectual property appeals has done more harm than good and should be changed legislatively.

The problem is that specialized courts, like specialized administrative agencies, are inherently prone to "agency capture" by the regulated industry. In this case, there is a strong argument to be made that patent holders have "captured" the United State Court of Appeals for the Federal Circuit and thereby secured a long series of rulings on every issue of patent law that is favorable to them.